Should Lloyds chief take a leaf out of the IFA book?

So a powerful but extremely self-interested voice has joined the growing clamour against claims firms inciting spurious claims.

In a letter to justice secretary Chris Grayling, Lloyds Banking Group chief executive António Horta-Osório calls on the Government to force claims firms to cover the cost of “invalid or bogus” Financial Ombudsman Service claims.

In response, the Ministry of Justice says it is looking to “minimise the burden” caused by unscrupulous claims firms and is in talks with the British Bankers’ Association.

It is worth remembering the huge growth in PPI claim firms is in part due to extremely poor claims handling from high street banks who invested significant sums trying to persuade those with valid claims to drop their complaints.

If the big banks had come clean and admitted their responsibilities earlier in the day there would be less claims firms competing for business. If they hadn’t dragged their feet with so many valid complaints the banks would not be suffering the recently introduced punitive £850 FOS case fees for PPI claims.

That said, it is good to see Horta-Osório joining large number of IFAs and mortgage brokers calling for action against dodgy claims firms. His proposal mirrors a campaign run by MM’s sister publication Mortgage Strategy last year (unfortunately we got nowhere near the 100,000 needed to trigger a Parliamentary debate!!).

It is a depressing reality that the influence LBG carries in the corridors of power is far greater than a group of angry advisers.

The MoJ says it is beefing up its claims firm regulation with 200 firms recently shut down and a further 400 warned or suspended. However, far more needs to be done.

The Legal Ombudsman will soon be given powers to award up to £50,000 redress to consumers who believe they have been mistreated by claims firms.

But firms burdened with the costs of dealing with dodgy claims have no ombudsman to complain to. These can be substantial costs for a small firm to stomach which may end up being passed down to clients.

A quick look at recent FOS data shows the increasing number of “confused” PPI complaints which are actually about life, critical illness or income protection. This is a good indication of the levels of nonsense claims still being generated against IFAs who never sold PPI. The FOS does not give a breakdown of how many of these claims are generated by claims firms but you’d expect a high percentage (overall the split is around 50/50 claims firm Vs direct complaint).

In last week’s Money Marketing, IFA Neil Liversidge wrote of a scam he has noticed involving offshore call centres fishing for potential claim details and preparing the customer to say the right things before passing them on to a UK claims company. It appears some claims firms are more than a couple of steps ahead of the MoJ.

The MoJ has produced a template for banks to report unusual claims firm activity to the Government department and Liversidge is hoping a slimmed down template can be created for adviser firms to easily complain to the MoJ about firms that are wasting their time and money.

As a result of the growing number of unwarranted complaints, a number of advisers have taken matters into their own hands, billing claims firms for the time it has taken to deal with them. As we have previously reported, a number have actually paid up.

Rather than waiting for the MoJ to get its act together, perhaps Horta-Osório might consider following suit and charging firms for the time taken to deal with dodgy claims.

It is obviously easier for IFAs to pinpoint fraudulent claims given their personal knowledge of the business written but there should be no reason why a big bank cannot isolate repeat offenders and start to bill them for their time.

Direct action from advisers and the banks could be best way to clean up the claims chasers.

Paul McMillan is group editor of Money Marketing- follow him on twitter here

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